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Summary Business ethics (Crane & Matten 4th edition) Thomas Jonkman
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Summary of the 4th edition of the book Business Ethics by Andrew Crane and Dirk Matten
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Summary Ethics chapter 1 and 2 – Globalization, sustainability and CSRBusiness ethics the study of business situations, activities and decisions where
issues of right and wrong are addressed. There is a gray area outside law and
ethics. Ethics begins where the law ends
- Morality: concerned with norms, values and beliefs embedded in social
processes which define right and wrong for an individual or a community
- Ethics: concerned with the study of morality and the application of reason to
explain with rules and principles whether a given situation is right or wrong.
These theories are ethical theories.
Ethics is important because (examples):
- Power and influence of business in society is greater than ever before;
- Businesses provide major contribution to society
Globalization = deterritorialisation process which diminishes the necessity of
a common/shared territorial basis for social, economic/political processes. Effects
three areas affected by globalization:
1. Cultural issues businesses confront themselves with new, contradictory
ethical demands
2. Legal issues legal framework expands and thus is harder to contain
3. Accountability issues the more economic activities get globalized, the less
governments can control them
Sustainable development development that meets the needs of the present
without compromising ability of future generations to meet their own needs. Long-
term maintenance according to environmental, economic, social considerations
(triple bottom line).
A corporation Separate legal entities, independent from the people who
work in them, manage them, invest in them or receive products from. Perpetual
succession: they can survive the death of any investor, employee, boss; they simply
have to find a new one. Managers have responsibility to protect investment of
shareholders.
Milton Friedman: ‘Social responsibility of business is to increase its profits’.
Arguments:
- Moral responsibility only human beings have a moral responsibility for
their actions
- Shareholder interest it is managers’ responsibility to act only in interest
of their shareholders whenever corporation abides to the legal framework
society has set up for business.
- Role of corporations and state social issues are proper province of the
state, not corporations. Managers are not democratically elected and have no
competences like politicians.
Against Friedman.
, - Moral responsibility firms are also morally responsible for their actions
- Shareholder interests managers’ responsibility to act also in interest of
stakeholders
- Role of corporations and state social issues are also province of
corporate managers
Corporations have social as well as financial responsibilities corp takes on
social responsibilities in terms of enlightened self-interest. To enhance revenues,
reduce costs, manage risk and social license to operate.
Arguments that firm has moral responsibility:
- Corporate internal decision structure directs decisions in line with
determined goals
- Organizational culture set of beliefs and values that lay out what is
generally regarded as right or wrong.
Managers have to act in the interest of stakeholders because:
1. CSR
a. For business reasons more satisfies customers, more employee
attraction, forestall legislation, long term investment from
stakeholders: all benefit corporation
b. For moral reasons corp. cause social problems, corp. should use
their power responsible, corp. activities have social impacts, lot of
stakeholders are involved
c. Carroll’s model. Firm has following responsibilities:
i. Philanthropic (desired by society) intrinsically doing good
to society.
ii. Ethical (excpected) corp. should do what is right and fair:
general expected by society
iii. Legal (required) business needs to abide by the law
iv. Economic (required) shareholders demand reasonable
return, employees want safe pay, customers demand good
quality products
Corporate social performance (Donna Wood) measured outcomes of social
responsibility on areas: social policies (in CSR report), social programs
(implementing ISO 14000), social impacts (soft/hard outcomes).
2. Stakeholder theory (Freeman) stakeholder is any group or individual who
can affect, or is affected by, the achievement of the organization’s
objectives. Two principles of Evan & Freeman
a. Principle of corp. rights: corporation has obligation to not violate rights
of others
b. Principle of corp. effects: corporation is responsible for effect of actions
on others
Social issues are also province of corporate managers because:
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